Insurance Coverage and Bad Faith

In Kreamer v. Lobar (Carbon County 2015), the Court of Common Pleas found that subcontractor Chowns Fabrication and Rigging did not breach its obligation under its subcontract with general contractor Lobar Inc. in spite of Chowns’ failure to secure liability insurance to protect Lobar from any claim arising out of Chowns’ operations.

As part of its subcontract, Chowns was required to have Lobar named as an additional insured to Chowns’ Commercial General Liability Policy ” for claims ’caused in whole or in part by’ the subcontractor’s negligent acts or omissions.” Chowns did in fact obtain a certificate of insurance so providing. However, when the underlying claim was tendered to Chowns’ carrier, the claim was denied.

In his complaint, Plaintiff, an employ of Chowns, alleged injury as the result soley of Lobar’s alleged negligence. The complaint alleged that Lobar failed to: establish safety standards and policies for the erection of plywood structures; implement a safety plan; appoint sufficient supervisors; adequately train personnel; require workers to remove plywood structures; adequately inspect the job site; inform Kreamer of the dangers of removing the plywood structure; and provide him with assistance and means of doing so.

Judge Nanovic , in his opinion denying Lobar’s motion for summary judgment and granting Chowns’ motion for summary judgment dismissing Lobar’s Third Party Complaint, found that the agreement did not require Chowns to provide coverage for claims that alleged negligence solely by the general contractor (but only for claims “caused in whole or in part by subcontractor’s acts or omissions”).

This opinion is instructive with respect to the care that must be taken in drafting Additional Insured provisions in both General Contracts and Subcontracts.

Opinion available at: PICS 15-1646 (Carbon Cty. 2015)